emir are you prepared to report your derivatives transactions ? · 2018-05-20 · 17 june 2013 emir...

17 June 2013

EMIR

Are you prepared to report your

derivatives transactions ?

© 2013 Deloitte Tax & Consulting

Xavier Zaegel

Deloitte Luxembourg

Are you prepared to report your

derivatives transactions?

© 2013 Deloitte Tax & Consulting 3

Reporting of any derivatives to Trade Repository is one of the

main requirement introduced by EMIR

Today’s objectives

EMIR

Clearing

Standardised OTC

derivatives will need to be

processed through Central

Clearing Counterparties

(CCP)

Reporting

OTC

and traded derivatives

positions

to a

Trade Repository

(TR)

Ancillary impacts

in terms of

regulatory capital

requirements (CRD

IV provisions) for

credit institution or

collateral treatment

for investment firms

1

3

4

Risk

mitigation

techniques

(bi-lateral OTC):

- Timely confirmation

- Portfolio compression

- Portfolio reconciliation

- Mark-to-market valuation

- Dispute resolution

- Collateral requirements

2

• Highlight the EMIR Reporting

Requirements and go through

practical cases

• Review Trade Repository Services

Offering – Regis TR

• How SWIFT can help you to

connect to TR ?

• What I need to do as from now ?

Key take away


Agenda

Theory vs. Practice: Key Requirements & Case Studies 2

Regis TR 3

SWIFT 4

5

Are you prepared to report your derivatives transactions? 1

Q&A - Panel

6 What’s Next: Challenges and Opportunities - Linking the dots


Francesca Messini

Deloitte Luxembourg

Theory vs. Practice: Key

Requirements & Case Studies


2012 2013 2014

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

• Starting date: on the basis of the information available so far, ESMA’s best estimate is that the registration of the first

TR is not likely to take place before August 2013 and the reporting start date depends on the actual date of the

registration of the first TR : “where there is no TR registered before or on 01 April 2013, the reporting start date is

extended to 90 days after the registration of the TR”

• Reporting start date is extended by 180 days for the reporting of information referred to data on valuation and

collateral ( Art. 3 of EU regulation 148/2013 – RTS on reporting to TR)

Contract reporting start date + 90 days

Contract reporting start date + 3 years

16 August 2012

EMIR entry into

force

23 September 2013

Reporting start date for

credit and interest rates (if

TR has registered before 1

April 2013)

1 Jan 2014

Reporting start date for all other

contracts (if TR has registered for

product type before 1 October 2013)

Tra

de R

ep

ort

ing

Historical

contracts:

Key d

ate

s

Contract reporting start date + 3 years

19 December 2012

EU Commission adopted

technical standards

15 March 2013

Entry into force of

technical standards

Contracts outstanding on 16/08/12 and still outstanding on the reporting start date:

Contracts entered into on or after 16/08/12 that are closed on reporting start date:

Contracts outstanding on 16/08/12 that are closed on reporting start date:

15 March 2013

TR application

begins

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Source: EMIR, Deloitte Analysis

OTC Derivatives Reporting The countdown to reporting obligation


Theory: EMIR Requirements Key requirements aiming at increase market transparency

Counterparties and

CCPs shall ensure that

the details of any

derivative contract

(OTC and ETD) they

have concluded and of

any modification or

termination of the

contract are reported to

the TR no later than

the working day

following the

conclusion,

modification or

termination of the

contract.

(Art. 9 EMIR Law)

By the end of the day

following the execution,

contract and all its

characteristics are

reported

Record keeping following

termination of the contract:

• at least 5 years for

counterparties

• At least 10 years for

TRs

If no authorized TR is in

place by 01 July 2015,

the information are

reported to ESMA

Where no contracts are

concluded, modified or

terminated, no reports

are expected, apart

from the updates to

valuations or collateral

DAILY data to report:

• Information on collateral

can be reported on a

portfolio or single

transaction basis

• Fields on the contract

valuation, as maintained

and valued by the CCP

• Changes in market-to-

market or market-to-

model valuations on

already reported

transactions (for

bilateral trades)

Intraday reporting in

NOT mandatory

Lifecycle events are

covered and a log must

be done (Art. 4 of EU No

148/2013);

All information should be

reported at the end of the

day in the state that it is in

at that point.



Theory: EMIR Requirements General Reporting Fields


Contract Type

Details on the transaction

Modifications to the report

Risk mitig. / Reporting

Clearing

Counterparty data

Common data

Interest Rates

Foreign Exchange

Options

Common data specific

to each type of products

Commodities

• Information pertaining to the derivative transactions

executed between the two counterparties

• Common data reported must be agreed between both party

• 59 data fields split in 5 sections

• The details of the transaction are reported by Unique Trade

ID (UTI)

• The derivative product are identified by a unique product ID

(UPI), which reflects the class and type of derivative

• Reporting log for the modification of data

About it

• Information related to the counterparties to the contract

• Reported separately by each counterparty or their appointed 3rd party

• 26 data fields

• The counterparties and the other entities (such as broking entity, CCP, clearing member,

reporting entity) are identified based on a unique code (i.e. LEI)

&

&

• Specific information and fields are different from the class

of derivatives being reported

• Not required to be reported if the UPI is reported in the

Common data and contains all the information to be

reported for the specific product


Theory: EMIR Requirements Key requirements for historical contracts

OTC Derivative and Exchange Traded

Derivative (ETD) which were still

outstanding on 16 August 2012 will have

to be reported within

• 90 days of the date of the reporting

obligation coming into force if they

are STILL outstanding on that date

• And within 3 years of the date of the

reporting obligation coming into

force if they are NOT outstanding on

that date

Requirement (Art. 5 EU 1247/2012)

Specific requirements:

• No need to report separately any life cycle events

which occurred before the reporting date

Frequency

• The contract can be reported at position level in its

final state or, for contracts which are still

outstanding, its state at the time the report is

submitted

• OTC derivatives still outstanding will need to

include the information on valuation and collateral

as from the date of the reporting obligation (and

not for all the days from 16 August 2012 to the date

of the application of the reporting)

• OTC derivatives terminated before the reporting

obligation starts applying should not include the

information on collateral and valuation

• Trade-ID

• Applies to contracts still outstanding at the time

of reporting

• need to be agreed between the two

counterparties and reported, together with the

other information on that contract

Content

1

2



Theory: EMIR Requirements Roles & Responsibilities into the Reporting framework


Options Roles

Count A Count B

TR

2 delegation

1 Reporting by both counterparties

• Counterparty A and B reports separately to TR

• It is possible for each party to report to a different TR

• The TRs will reconcile the reported transactions via a

Unique Trade ID (UTI)

• Both parties have to ensure that common data are

consistent across both reports for the same trade

2 Reporting by one counterparty on the behalf of the other

• Counterparty B reports the Counterparty data of each party

and only one copy of the Common data

• The full set of details should still be provided by

counterparty A to B, as long as the information is available

3 Reporting by a (single / different) 3rd Party on behalf of 1

or both counterparties

• Conduct due diligence process of the reporting 3rd party

• Same liabilities and directives as the counterparties: data

protection schemes

• Voluntary delegation agreement, however the national

authority can revoke the utilisation of a third party

• Written agreement between the parties

Count A Count B

TR

3

3rd entity

A 3rd entity

B

delegation delegation

3rd entity

Count A Count B

TR A

1

TR B

ESMA

UTI


Practices: Cases study Reporting process & roles

Transactions cleared by the CCP

Count A

Clearing

Broker /

CM

Count B

Affirmation

platform

CCP

Clearing

Broker /

CM

OTF

RFQ

Confirmations

Margins Margins

Margins Margins

Confirmation Confirmation

Trades

RFQ 1

2

Reporting

to TR

3

4

Roles

• Counterparty(s) can delegate to CCP the reporting to TR: it

can choose the TR to be used and leave the choice to the

counterparty on whether to accept or not the service for its

trades to be reported by the CCP on its behalf;

• If BOTH counterparties agree to delegate reporting to CCP,

the report should indicate that is made on behalf of both

(Counterparty data field 9);

• The CCP becomes the counterparty in the report when the

counterparty is not aware of the identity of the other;

• Avoid duplication: counterparties and CCPs should agree

on the most efficient reporting method;

• In case of different TRs, CCPs and the counterparties

should report to the TRs consistent data, including the

same trade ID and the same valuation information to be

provided by the CCP to the counterparties;

• Where clearing takes place on the same day of

execution, the report should be submitted once to a TR up

to 1 working day after the execution;

• Where clearing takes place after the day of execution

and after reporting is made, novation should be reported as

an amendment to the original report up to 1 day after the

clearing took place.

Process



Cleared OTC transaction

NON - Cleared OTC transaction

Client Investment firm

(acts as principal)

Counterparty

CCP CM A

B

B

Imp

lic

ati

on

s

• The Client (FC or NFC) has the duty to report to TR 1

Case study 1 BACK to BACK transactions

A B

Practices: Cases study Reporting transaction scenarios

TR

Back-to-back

• The Investment firm, acting as principal, meaning

becoming a counterparty of the derivative

transactions, has the duty to report to TR: report the

Client as counterparty (field 3 of Counterparty data)

2 • The investment firm, acting as principal, meaning

becoming a counterparty of the derivative

transactions, has the duty to report to TR: report the

other counterparty as counterparty (field 3 of

Counterparty data)

• The Client will name the Investment firm as its

counterparty

3 • The Counterparty will name the Investment firm as its

counterparty

3

2

• The Counterparty has the duty to report to TR 1

• The Investment firm has to report the 2 trades 4

delegation





Individuals Bank

B

B

Imp

lic

ati

on

s

• Individuals are not subject to the reporting obligation

under EMIR

1

Case study 2 Individuals and Private clients

A B

TR

• The Bank has the obligation to report the trade to TR,

including the internal code of the individual with whom

it has concluded the transaction

1


A





Client

Bank

(execution of order or

receipt and

transmission of orders)

Counterparty

CCP CM A

B

B

Imp

lic

ati

on

s

Case study 3 Bank as an AGENT

A B

Source: EMIR, ESMA Q&A, Deloitte Analysis

• The Client (FC or NFC) has the duty to report to TR 1

• The Bank acts a agent (introducing broker): it means

that it does not sign or enter into any derivative

contract with the Client or the Counterparty and is

therefore not considered as counterparty under

EMIR, thus not being under the duty of reporting

2

• The Counterparty (FC or NFC) has the duty to report

to TR

1

• The Bank acts a agent (introducing broker): it means

that it does not sign or enter into any derivative

contract with the Client or the Counterparty and is

therefore not considered as counterparty under EMIR,

thus not being under the duty of reporting

2

• The Client and the Counterparty have the duty to

report, in quality of counterparties: they will know

each other as they will sign the bilateral agreement

3

• The Bank is identified as broker by the Client and by

the Counterparty in their reports (Counterparty Data -

field 8)

4


TR

delegation

REGIS-TR – the first European

Trade Repository for Derivatives

Powered by:

16

REGIS-TR

What REGIS-TR can be for the industry

A Trade Repository offering

registration and reporting services for

Derivatives out of Luxembourg

Belonging to well known European

Market Infrastructures within two

exchange infrastructures

What is REGIS-TR and who is behind REGIS-TR

Registration and reporting services for

Derivatives and holding the customer data

exclusively in the EU

Providing a one-stop-shop service, based on

a reliable, cost-efficient TR solution for all

types of market participants

Delivering added-value services well

beyond regulatory compliance – matching,

exposure management, third-country

domestic solutions…

What REGIS-TR brings to the industry

Reporting of

all asset classes

Interest rates

and fixed-

income

Equities

Foreign

exchange

Credit default

swaps

Commodities

Exchange

Trades Derivs

17

REGIS-TR

Technical architecture:

Developed on BME’s mainframe IBM platform with a central database server

using DB2

Efficiency, high security and scalability

Contingency measures:

Use of existing BME’s mainframe also used for CSD function:

Maximum back-up quality standards

Availability of two redundant locations with data centres and offices, with

synchronous data replication:

Integrity of back-up data

Internet access = BME Internet infrastructure with high capacity bandwidth and

complete redundancy: connection with two different ISPs through two

independent nodes. All components duplicated

Tested every 6 months

REGIS-TR is based on a secure and scalable system

environment

18

REGIS-TR

Market Participants

CCPs

Post-trading platforms

Clients

Trading platforms

Supervisory

Authorities

PDF

Third Party

delegation

Reporting Obligation

Information

enhancement Directly?

REGIS-TR – Reporting Flows

19

REGIS-TR

Feb 2012 Reporting flow for Reporting Participants

Reporting

Participant Counterparty

Regulator

1) Delegation

(optional)

3) Message

Accepted/Rejected

4) Reporting

5) Trade Status*

*) Trade status messages include information on contract, reconciliation and delegation statuses.

2) New Trade

5) Modifications,

Valuation/Collateral Update,

Cancellation/Termination

Seamless communication through alternative channels:

20

REGIS-TR

Feb 2012 Reporting flow for Third Parties and Non-Reporting

Entities

Third Party

Non-

Reporting

Entity

Regulator

1)

Delegation

3) Message

Accepted/Rejected

3) Trade Status*

5) Check

4) Reporting

*) Trade status messages include information on contract, reconciliation and delegation statuses.

BK (Backloading), VU (Valuation Update), VR (Valuation Received), MX (Modification), xT (Termination)

2) New

Trade

5) BK, MX,

VU, TT, FT 3) Trade Status*

Non-Member

1)

Delegation

Seamless communication through alternative channels:

21

REGIS-TR

Feb 2012 Flexible account structures accomodating needs of customers

Master Accounts – For direct

participants of REGIS-TR, allowing to

link “n” sub-accounts containing the

registered contracts (m prop and n client

accounts)

Sub-Accounts – Identified as prop or

counterparty account (n/m number of

accounts) to facilitate reconciliation and

control processes

Special accounts for trades coming from

3rd Parties and CCPs to facilitate

reconciliation and control processes

Possible activities you can have in REGIS-TR:

Reporting of own trades

Reporting of customer’s trades

Outsourcing of reporting to 3rd Parties possible

Consolidation of reporting obligation in one entity of a holding

structure

Master

Account

Participant

A

Master

Account

Participant

B

Master

Account

(3rd Party)

Prop

Direct Rep

…

Count.

Count.

…

Count.

Count.

Count.

…

Omnibu

s acc

Prop

From CCP1

Prop

From CCP2

Prop

From 3rd P1

Prop

From …

Prop

Direct Rep

…

Count.

Count.

…

Count.

Count.

Count.

…

Prop

From CCP1

Prop

From CCP2

Prop

From 3rd P1

Prop

From …

22

REGIS-TR

Feb 2012

REGIS-TR offers flexible and industry-standard access

System Access and communication

between participants and REGIS-TR:

Use of web-based application

Manual input/queries with secured

Internet access. Web access, exportable

to CSV files

Mass upload/download of XML files

through secured Internet access

Automatic transfer of XML files through a

SWIFTNet FileAct file transfer

connection and SFTP under

developement

SOAP API connection via web services

Processing of CSV files and data

transfer via SWIFT MT messaging under

development

Customer Service helpdesk during EU

working hours

Advantages:

Cost-efficient platform, accessible

from “anywhere”

Efficient/cost-effective particularly

for small participants

Efficient for medium- to large

participants

Use of low-cost widely used

industry standards

Alternative connection

possibilities, further flexibilizing the

options for participants

Online helpdesk support

Easy build-up of XML and CSV messaging that is widely used.

23

REGIS-TR

Access based on the ESMA technical standards

Access granted in accordance with regulatory demand, be it international or

domestic

REGIS-TR will record information regarding the access to data given to the

entities listed under EMIR, including the scope of data accessed and a reference

to the legal provisions granting access to such data, as ESMA technical

standards indicate

XML reporting provided by “push” to respective supervisory authority

Web based access with “supervisor” profile defined for each supervisory

authority providing:

Immediate full view of relevant entities’ positions exportable to CSV files

Pre-defined queries exportable to CSV files

Aggregated market dissemination on regular based (weekly statistics)

Archiving of information:

10 years after termination of contracts

Can be increased if required

Access for market authorities

24

REGIS-TR

Rolled-out and planned developments

Ongoing developments:

Continuous enhancement of “Final Report-compliant” permanent test environment

(Nov 2012)

Connectivity to different CCPs, starting with Eurex Clearing

Capturing of trade details of OTC- as well as Exchange-traded and cleared

derivatives directly from the clearing-house

Connectivity to SWIFT

Capturing of trade details of OTC derivatives transactions confirmed via

SWIFT MT messages directly out of the SWIFT system Value-added Services for 2013

Reporting Hub:

REGIS-TR to perform central reporting hub services for future trade reporting necessities

of the industry in the framework of e.g. MiFiD, REMIT, CRD IV…

Exposure Management:

Existing international or domestic collateral pools for collateralisation of exposures in OTC

derivatives (Clearstream Cmax)

Bilateral portfolio reconciliation services for counterparties to comply with the

reconciliation obligations defined in ESMA technical standards.

25

REGIS-TR

Added-value services with our partners

OTC Collateral Management:

Collateral agreement negotiations

CSA set-up

Exposure valuation

Margin call administration

Portfolio reconciliation

Cash/securities management

Reporting through REGIS-TR

TriOptima connection:

TriOptima offers a range of analytical tools to

support your derivative trading, including a

connection to REGIS-TR.

Portfolio reconciliation and counterparty

exposure management

Portfolio compression and early

termination

Counterparty risk balancing

Other partners include:

26

REGIS-TR

Why REGIS-TR?

Product offering:

Close contact with ESMA

First “ESMA-compliant” test environment

launched in Nov 2012. Free access

A complete technical documentation

available. Mapping works can be started

already.

Reporting can be made easily via XML

files and soon via CSV files as well

Automation of connectivity: SWIFTNet and

Web services SOAP API

Connectivity to Eurex Clearing and Meff

A number of software providers partnering:

B+S, C24, Cinovo, CAD IT…

Reporting Hub: central reporting hub

services e.g. MiFiD, REMIT, CRD IV…

Exposure Management: connection with

Clearstream Collateral management

system

Commercial offer:

One-stop-shop in the EU

Clearstream sales force coverage &

technical help-desk to assist your IT team

Flexible participation profiles, allowing any

entity to participate directly or delegate to a

third party or play both roles if necessary

Legal agreements already available

Flexible fee schedule with caps and

discounts (free Backloading before

reporting start date)

OTC derivatives reporting

Use SWIFT to comply with EMIR

17June 2013

Joe Halberstadt

How can SWIFT help?

28

EMIR

Standards for electronic confirmations

Matching & Affirmations

Reporting to Trade Repositories

Access CCPs

Consulting services

EMIR & OTC derivatives reporting - June 2013

SWIFT standards

EMIR & OTC derivatives reporting - June 2013 29

• Enhanced for OTC derivatives

– Carry additional data, like CCP information

and unique transaction identifier

– Support reporting to Trade Repositories

• Solution

– New sequence: “Reporting Information”

– Optional sequence, all fields optional

• Effective date

– For live: November 2013

– For test environment: July 2013

– Interim solution: use existing messages

with Unique Swap Identifier in field 72

Confirm electronically and timely

SWIFT Affirmations + Alliance Lite2


Accord Affirmations

Alliance

Lite2

Cloud based

Low-cost, secure solution to confirm trades electronically

Easy: accept/reject with mouse click

Integrated audit trail

SWIFT solutions for derivatives reporting


You Reports

(XML, FpML,

csv, …)

Automatic file transfer:

FileAct

Confirmation copy:

FINInform

Trade repository

• REGIS-TR

• LSE Unavista

• Russia, Hong Kong

• Re-use your SWIFT connection

• Cost-effective, automated file transfer

• High security: authentication, electronic

signature, encryption, non-repudiation

You

MT3xx

Trade repository

• REGIS-TR

Counterpart

• Re-use your SWIFT connection

• No need to produce report for initial

submission

• Confirmations containing trade details

are copied to trade repository

• DTCC

Global Trade

Repository

• Re-use MT300 for NDF clearing at CCPs

• Seamless copy via collaboration with MarkitServ

• Future extension to FX Options

Access CCPs via SWIFT


Single SWIFT message to confirm trade,

report to repository,

submit for clearing!

See MarkitServ press release.

You Counterpart

(1) MT300 confirmation

Custodian

(6) MT304

MarkitServ

(2) Copy to

CCP Gateway

(4) Status - MT396 (3) CB Take up

Clearing broker

CCPs

(5) Submit to

CCPs

• LCH

• SGX

• CME

• HKEX

http://www.markitserv.com/ms-en/media-centre/press-releases/detail.page?dcr=/markit/PressRelease/data/ms-en/2013/February/11

EMIR & OTC derivatives reporting - June 2013

Thank you

33

Further information

• http://www.swift.com/products_services/derivatives_overview

• Factsheets

– Standards Release 2013 - Changes for OTC derivatives

– SWIFT Accord Affirmations with Alliance Lite2

– OTC derivatives trade reporting

– MarkitServ FX Clearing Service


http://www.swift.com/products_services/derivatives_overview


Q&A | Panel

• Nicolas Boatwright

• Laurent Collet

• Joe Halberstadt

• Francesca Messini


Laurent Collet

Deloitte Luxembourg

What’s next: challenges &

opportunities | linking the dots


EMIR – The journey to the compliance starts now What do you need to do ?

Source: Deloitte Analysis

1. Impact assessment – Have a clear idea of how EMIR impact you in

terms of :

• Products / volumes

• Clients (FC, NFC, NFC+, Persons)

• Counterparty – Contracts

2. Set up the right priority to compliance tasks. Align your compliance

planning in terms of tasks complexity, gap assessment, authorities timeline

3. Keep in mind the global regulatory picture. Collateral is a transversal

topic within incoming regulatory framework (AIFMD, UCITS V & VI, ESMA

Guidelines, CRD IV, …)

4. Setting up trade repository arrangements

5. Consider report directly to the trade repository or delegate reporting

to your counterparty or a third party ?

6. Identify data sources; planning around systems developments and

user-acceptance testing; consideration of data protection issues

7. The longest journey starts with a single step, but how you reach your

destination depends who walks at your side..


Your facilitators today

42, Avenue J.F. Kennedy

L - 1855 Luxembourg

Tel: +352 243 36481

Email: [email protected]

Francesca Messini

Manager

Tel:+352 451 452 791

Mobile: +352 661 451 744

Mail: [email protected]

Laurent Collet

Director

Tel:+ 352 451 452 112

Mobile: + 352 661 451 411


Benjamin Collette

Partner

Tel:+ 352 451 452 809

Mobile: + 352 621 283 574


SWIFT

London

Tel: +44 20 7762 2129

www.swift.com

Xavier Zaegel

Partner

Tel:+ 352 451 452 748

Mobile: + 352 621 364 628

Mail: xzaegel.lu

http://www.swift.com/


Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate

and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in

more than 150 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte's approximately 200,000 professionals

are committed to becoming the standard of excellence.

emir are you prepared to report your derivatives transactions ? · 2018-05-20 · 17 june 2013 emir...

Documents